This is intended to eventually lead to replacement of the U.S. dollar as the world reserve currency. To the extent that it does, less dollars will have to be held by sovereign banks for settlement of international trade, and these dollars will enter back into circulation. This “flooding of the world” with dollars will tend to drive the value of dollars down.
A Chinese central bank official confirmed an international development organization would soon issue SDR bonds in China, according to Chinese media Caixin. … Caixin now confirmed which organization exactly will issue the bonds and when: The World Bank and the China Development Bank will issue private sector or “M” SDR in August. The so-called SDR are an IMF construct of actual currencies, right now the euro, yen, dollar, and pound. … The Chinese renminbi was also admitted, although it won’t formally be part of the basket until October 1st of this year.
The G20 finance ministers confirmed they will push this issue, despite private sector reluctance to use these instruments. … They are following the advice of governor of the People’s Bank of China (PBOC), Zhou Xiaochuan, although a bit late. Already in 2009 he called for nothing less than a new world reserve currency. … Seven years later, it looks like he wasn’t joking. (China moves forward with SDR Issuance in August)
It seems likely to me that a world financial collapse is expected, and SDRs are intended to be standing at the ready to become the new world currency.